Governance sets the values of an association and is separate from the day-to-day operational management. How confident are you in your association governance?

Modernising Boards

Governance is the way in which organisations are directed and controlled. It’s about what the board does and how it sets the values and is separate from the day-to-day operational management. This chapter reviews the role, structure, skillsets and behaviour of the board and the critical relationship between it and the CEO.

You cannot be a modern association without a contemporary board.

Who can forget the courtroom scene in A Few Good Men with junior lawyer Tom Cruise yelling at senior military commander Jack Nicholson and being told he can’t handle the truth. Enraged and in justifying his establishment’s secret codes of injustice, Nicholson unintentionally confesses to ordering the violent ‘Code Red’ extrajudicial punishment that lead to the death of an innocent marine. Nicholson’s truth was that outsiders could not comprehend the difficulties of leading his organisation and that they should simply be thankful for the services it provides without questioning the governance by which it operates.

The truth for associations is that covert operations outside of the formal governance structure can afflict damage, and that poor governance in itself can do the same. Everyone pays for these breaches or shortcomings in the long-term.

It is simply not possible to be a modern, contemporary organisation without a modern, contemporary board and governance structure. The agenda for progress, innovation and influence must start at board level, or it will be resisted. Once the mission and vision are in place, the next step is to work out how to get there. Governance provides a framework to achieve these objectives.

Governance is too often seen as the enemy, typically associated with regulation and bureaucracy, rather than as an ally of progress and innovation. Good governance is the keystone of organisational success, providing a balance between compliance and performance. Far from adding to an association’s administrative burden, good governance can actually improve it. Robust, efficient structures, systems and processes can reduce inefficiency and keep an association in line with its mission and vision. The right skills matrix on the board enables it to formulate better strategies to achieve its objectives.

  • Good governance is not merely about compliance, it is an enabler of effective decision making and a powerful driver of organisational performance. It should be fit for purpose. A small or mid-tier association does not need the governance structure of a global multinational, but it does need a good governance model that is relevant to its size, impact and operations.
  • Good governance is at the heart of every successful association, but it often takes a crisis to ignite governance reform. Why wait? Boards that act now to optimise their governance structures create a powerful competitive advantage into the future.

This chapter is not written as a comprehensive guide to governance. Its purpose is to inspire positive action towards appropriate governance improvements by emphasising the benefits it brings to associations. It is also written to evoke a fear of inaction by highlighting the risks, threats and shortcomings poor governance exposes.

The future of every association rests in the hands of its board. Good governance enables a board to perform. Board directors are the fiduciaries who direct their association towards a relevant and sustainable future with sound, ethical, legal governance and financial policies.

Poor governance is the greatest self-imposed block to the future of associations, alongside board capability. Worryingly, 26% of associations reported that Governance Structure was among their biggest challenges today, with 20% including Bureaucratic Processes on the same list. The similarity in percentages is no co-incidence. Frequently, associations with poor governance often share a higher burden of bureaucracy. Poor governance creates inefficiency. The implicit message of poor governance and the bureaucratic burden it causes is that it is acceptable for employees to replicate it. This can spread three layers of inefficiency within the association – from the board, to the executive and throughout the staff.

While it is the board’s role to ensure good governance, 41% of associations state that Board Capability itself is one of their biggest challenges. It may be fair to conclude that some associations find themselves in a vicious cycle. Good governance requires a capable board.

Adding to this burden is a lack of accountability. Only 6% of boards have clearly measurable, specific and defined objectives at the associations for which they are responsible. The privilege of responsibility must come with the answerability of accountability, with each board director to be held accountable for his or her actions just like everyone else within the association. The performance trinity of clarity, measurement and accountability applies as much to an association’s governing body as it does for any of its other functions.

Inappropriate pressure from members can also be a barrier to good governance. Members may not understand its importance and incorrectly perceive it as an administrative cost that they pay for. It is the board and executive’s role to engage and inform the membership on the benefits of good governance and explain to them why they need it. Once members realise how it drives performance and delivers benefits for them individually, it’s surprising how quickly they can change and support it.

A 2016 McKinsey & Company global survey¹ on the effectiveness of boards across 37 specific tasks found that boards can be categorised into three general groupings: The Ineffective Board, The Complacent Board and The Striving Board.

Ineffective Boards report the lowest overall impact on long-term value creation, often not executing tasks or not aligning with the executive team. They lack trust and respect.

Complacent Boards report higher levels of trust, but struggle to embrace feedback or focus on organisational health and talent. Reflecting their complacency, they perceive their overall impact more highly than the other boards, but only execute three of the 37 tasks efficiently.

Striving Boards value a strong culture of trust and respect, work at constructively challenging each other and are effective on 30 of the 37 tasks. They are particularly effective on strategy and performance management, and adjust strategy on a continuous basis.

McKinsey also identified three improvements for boards – to spend more time on board work, to balance trust with challenging discourse and to appoint an ambitious Chair.

In a Few Good Men, Tom Cruise uncovers the truth of poor governance that triggered an unjust crime, and Jack Nicholson is led away in handcuffs. To their surprise, the two junior staffers who dutifully obeyed the rules of their organisation and followed Nicholson’s orders are dishonourably discharged. No-one wins when governance is poor. But associations can handle the truth of good governance with an efficient, skilled, accountable and diverse board.

And Hollywood, please re-title the movie to A Few Good Men and Women.

Good Governance

  1. Roles and Responsibilities – There should be clarity regarding individual director responsibilities, organisational expectations of directors and the role of the board.
  1. Board Composition – A board needs to have the right group of people, having particular regards to each individual’s background, skills and experience, and how the addition of an individual builds the collective capability and effective functioning of the board.
  1. Purpose and Strategy – The board plays an important role in setting the vision, purpose and strategies of the organisation, helping the organisation understand these and adapting the direction or plans as appropriate.
  1. Risk Recognition and Management – By putting in place an appropriate system of risk oversight and internal controls, boards can help increase the likelihood that their organisation will deliver on its purpose.
  1. Organisational Performance – The degree to which an organisation is delivering on its purpose can be difficult to assess, but this can be aided by the board determining and assessing appropriate performance categories and indicators for the organisation.
  1. Board Effectiveness – A board’s effectiveness may be greatly enhanced through: careful forward planning of board-related activities; board meetings being run in an efficient manner; regular assessments of board performance; having a board succession plan; and the effective use of sub-committees, where appropriate.
  1. Integrity and Accountability – It is important that the board have in place a system whereby: there is a flow of information to the board that aids decision making; there is transparency and accountability to external stakeholders; and the integrity of financial statements and other information is safeguarded.
  1. Organisation Building – The board has a role to play in enhancing the capacity and capabilities of the organisation they serve.
  1. Culture and Ethics – The board sets the tone for ethical and responsible decision making throughout the organisation.
  1. Engagement – The board helps an organisation to engage effectively with stakeholders.

Good governance is surprisingly dynamic, proactive and far-reaching. Here are some guiding principles.

Organisational Structure

On 1st January 1901, the six separate British self-governing colonies of New South Wales, Queensland, South Australia, Tasmania, Victoria and Western Australia united to form the Federation of Australia. At that time, it made sense for new associations to form under a similarly federated structure – national organisations with individually incorporated state entities, each with their own separate duplicated administrative systems. Today, no national association would choose to establish under this inefficient operating structure, so why do some still hold onto this cumbersome, resource-sapping federated model?

Separate boards, CEOs and administrative functions create a duplicated and inefficient bureaucratic burden – wasting critical resources. Each separate silo dilutes the focus away from one clear, united mission and vision by prioritising state agendas over national requirements – making it harder to achieve key objectives. Interstate rivalries reduce the ability to respond with speed and agility to national market needs – enabling competitors to steal market share and influence. Conflicting objectives create internal friction, politics and fiefdoms keeping the association inwardly focused – reducing its ability to focus externally to serve members and markets. All of this adds an additional burden which is a big disadvantage in today’s fast and efficient network economy.

A contemporary unitary structure with associations governed as a single national entity can resolve most of these challenges. Centralising six or more state-based boards, CEOs and management functions such as finance, marketing, member services, IT, HR and business development into one lean national structure releases significant resources. It facilitates a single national governing body to oversee good governance, and enables a cohesive strategy towards mission and vision with a national value proposition that makes it easier to support staff, engage members, attract partners and sponsors, and advocate on national issues. It allows precious resources to be directed away from duplicated board and management functions into member benefits and into supporting state-based staff to perform their jobs more effectively. It overrides local rivalries to reduce internal politicking and focuses the association on better delivering its external objectives, tackling disruption and offsetting competitive forces. The case studies in this chapter outline some best practice strategies in going about this major structural change, and show that is possible, practical and positive.

It is a necessary transformation. Like a caterpillar’s journey in growing into a butterfly. The same transformation awaits federated association structures.

Board Size

There is no one board size that fits all. However, there is increasing consensus that the optimum skills matrix can be achieved with a surprisingly small number of suitably qualified individuals. Average association board sizes are on the decrease and currently sit around 10 to 12 members, depending on the source of different data providers. Anecdotally, there is discussion in the sector about eight members being ideal. Another informal mantra puts the optimum board size at ‘Seven, plus or minus two’.

The key takeaway here is that the days of association boards running to 16 or more individuals are well and truly redundant. Historically, it may have made sense to have large boards when infrastructure or communications limitations made it difficult to form a quorum, or where multiple numbers of generalists compensated for a lack of highly skilled experts to manage risk and performance. Neither reason holds true today. Board meetings can be convened quickly, efficiently or even virtually. Greater specialist knowledge has reduced the need for a large number of individuals. Today, the optimum size is the minimum number of individuals to deliver the required skills matrix for the board to perform effectively.

Board sizes greater than the optimum number add an unnecessary administrative burden, avoidable financial costs and reduce the efficacy of decision making. Why have 20 directors if ten can do the job? The reality is that if two board directors have the same skills and perspective, one of them is redundant. One highly skilled director bringing the expertise previously shared among three other individuals can effectively replace all three. Associations are increasingly questioning the time, resources and financial costs required to service a large board. Preparing and distributing board papers, flights, accommodation and entertainment all come at a cost. In the same way that ‘too many cooks spoil the broth’ too many directors can make it harder for association boards to perform their roles effectively. The optimum number of individuals for efficacy is relatively small.

Members want to see efficient boards too. They hate to see member funds wasted, and an oversized board or large bureaucracy tells them that their association is inefficient. Their expectations are for associations to transform into best practice, contemporary structures that invest a greater share of funds into external member benefits, rather than on internal administration.

The formation of new committees is an alternative for associations to reduce large board sizes. These working groups can provide valuable advice in any number of specialist segments such as geographical areas, member groupings, product/service divisions or business functions. Voluntary committees eliminate the administrative burden and costs, but maintain the loyalty and contribution of past directors in an advisory role. They can be used as a conduit to provide feedback from members and to feed issues to the marketplace. They work exceptionally well in state-based formats, so long as they have a clear agenda to direct their activities. Committees can also assist formerly federated structures in their transition to a unitary model by providing past directors with an opportunity to continue making a valid contribution.

Associations no longer need to carry excess directors. Moving towards an optimum board size delivers cost savings, improves efficacy and conveys member expectations.

Skills Matrix

The majority of associations operating today inherited a certain board composition established sometime in the past. Some will have made changes or improvements to this over time. But very few will have created an optimum board composition based on pre-determined skillsets required for oversight of the organisation into the future. And yet, this is by far, the most effective way to ensure that the breadth and depth of board skills matches the needs of the association’s mission, vision and future strategy.

Numerous skills matrix templates are available, or a Google search away. There is no one matrix that fits all. The governance needs of a small association in a straightforward sector cannot be compared with the demands of a complex, multi-million dollar association in a highly competitive and fast changing environment. What they share in common is a need to identify the skillsets they require. For one, this may be a simple matrix of strategy, risk and compliance, financial and audit, and policy development skills. For another, it may be an exhaustive list of subject matter expertise such as marketing, law, mergers and acquisitions, government relations, workplace health and safety, IT, HR or more. It can also include behavioural competencies, industry exposure and strategic capabilities.

The next step is to decide on the skills required, and select which of these need to be represented on the board, and which can be managed elsewhere within the association. An assessment of the required skills against the current skills reveals the skills gaps in the board’s current composition. It enables a review of each of the current directors’ skills, and provides the basis for future board recruitment priorities. Knowing exactly what new skills the board needs makes the job of identifying relevant candidates much easier, and more strategically aligned with mission, vision and objectives. Attracting talent with different skills and perspectives encourages board diversity, which in turn sparks more robust debate through a diversity of ideas. This can increase board capability, and put appropriate pressure on all directors to perform.

Sometimes, this may mean associations need to look outside of their memberships for directors. Bringing in expert knowledge and mindsets from other sectors can provide both a fresh perspective and a competitive advantage. Potential directors need to be screened and interviewed with as much diligence as recruiting a new CEO. This includes a formal interview process based on clear written requirements, linking to the skills matrix gaps with particular attention to avoid any bias, such as service providers intending to use their positions to sell services, or individuals looking to use their directorship for networking or other purposes. The skills matrix enables a board to ensure the board composition is strictly aligned to the needs of the association.

Osteopathy Australia’s Chair led the charge for its board to move to a skills matrix, with a gradual, planned and communicative process that took two to three years to realise. ‘It’s surprising how quickly board culture can change for the better, when this happens’ says Osteopathy Australia CEO Antony Nicholas. Together, they mapped out a process to get skilled directors on the board from the start, and explained the rationale to members by explaining the benefits of what it means to them to have good governance within their association. They broke the process down into its constituent parts, and took small achievable steps regularly, rather than a sudden change. They engaged members directly, as well as through champions and webinars to explain the process and planned the timing carefully around General Meetings. They recognised that some directors might find the process threatening, and integrated outside directors one by one. They replaced the former state representative directors with new state committees to maintain continuity, and have a plan in place to ensure that successive boards are supportive. Antony’s key recommendations are to plan well, have the Chair lead and take achievable steps.

Board Roles

Beyond the skills matrix, the ultimate success of the board will be its leadership and chemistry through clearly defined roles.

It is a sense of unity and collaboration which distinguishes associations that thrive. The unity begins with the Chair-CEO relationship, and the chemistry between them is as critical as the clarity in roles and the separation of powers. The CEO is the only employee of the board, and all management and staff are the employees of the CEO. The Chair brings the board, and the CEO brings the management. Together, they drive the future agenda but it needs to be clear who the voice of the association is. It doesn’t matter who, so long as it is clear, just like all the other board roles.

  • Chair or President – The title of Chair or President are often used interchangeably within Australian associations, and will be treated as one and the same for this book. The Chair ensures the board of directors fulfils its responsibilities for the governance and implementation of its policies and procedures. He or she is the main link between the board and the leadership team, and works in partnership with the CEO to achieve the association’s mission, vision and objectives. The separation of powers between the Chair and the CEO must be exactingly defined. So much of good governance comes down to clarity.
  • Vice President – The Vice President serves a practical role in filling in for the Chair when required. The role can also be useful in succession planning, although care needs to be taken not to set this in stone either. The individual filling the role needs to demonstrate a capability for the Chair’s responsibilities. A long-serving Vice President is not necessarily the best choice as a future Chair, if he or she does not display the required attributes. The role of Chair is to be earned through merit, not through time.
  • Secretary – The Secretary is an outdated board position, used historically to take minutes of meetings, and sometimes verbatim. This role does not need to be a director for it to function, and is best delegated to an administrative officer instead. This frees up a board position for more appropriately skilled directors. Companies limited by guarantee require a Company Secretary, but that is a different role altogether and one that can also be performed by the CEO or another qualified executive.
  • Treasurer – The Treasurer is another outdated role. Ostensibly responsible for oversight of financial management and reporting, the danger with this position is that the rest of the board can come to rely on the Treasurer’s say so, rather than on their own diligence. Every board director is liable for the financial health of their association, and this responsibility cannot be abrogated. For this reason, many associations have already moved to replace the role with audit and risk committees.
  • Past President – Immediate Past Presidents or former Chairs appointed to the board as friendly wise old counsel to support the new team carry potential risks. All directors are liable, so there is no role for ‘wise counsel’ on a board. Advisory roles outside of the governance structure are more appropriate to harness historical experience and advice.
  • Board Directors – Individual directors share overall responsibility for the association, but only maintain powers which have been given to them by the board and can report on their particular areas of responsibility. They do not need board-specific titles to fulfil their roles which are ideally based on the appropriate skills matrix. However, the title director correctly conveys more leadership and responsibility than the passive alternative title of board member.

The overall role of an association board is to supervise both compliance and performance. Some boards may see themselves as more aligned with statutory boards, prioritising compliance over performance. The reality is that performance is equally important. Just because an association may be defined as a nonprofit entity does not mean it should not be financially successful. Thorough board and director evaluation across all areas of responsibility can help manage the effective contribution of the directors to the success of the association. While the board retains accountability for the association developing effective strategies to achieve mission, vision and objectives, it must delegate the management and implementation of this process to the CEO. Its role is to support and monitor the CEO’s progress towards these objectives.

Paid v Voluntary Directors

Unpaid directorships work well for the majority of associations. In these cases, the voluntary structure is appropriate to the resources available, aligned to member expectations and the time and commitment required of directors is not too onerous. However, like the extremities of the bell curve, there are instances where it has limitations.

At one end, there may be cause to consider a paid Chair or board for large, complex associations where multiple, specific best practice skillsets are required in order to achieve objectives, or when the expectation from directors to deliver high-stakes results is unusually challenging. Provision for this in the constitution needs to be subject to approval from a member ballot so that it is clear what new value and benefits directors are delivering from paid positions.

At the other end of the scale, it may be necessary to remind some directors that their voluntary status does not abrogate their responsibilities, and that when the going gets tough the expectation is that they contribute more, not less. The term ‘you get what you pay for’ can be dismissive of volunteerism which is easy to turn on and turn off, so the commitment, diligence and persistence of volunteer directors must remain strong, regardless of the circumstances. In many ways, it can be more difficult to be a volunteer director than a paid one because the expectations to perform are the same, and there are no other perks beyond a sense of fulfilment, belonging and accomplishment.

The Chair needs to manage two peculiarities of volunteer directorships.

The first is the inherent potential conflict of interest when directors are appointed from member companies. Given that individuals or companies join membership-based associations in order to gain some form of benefit, it stands to reason that these directors may find themselves in positions of power that can benefit their companies or themselves personally. Will these individuals act independently as directors in the exclusive interest of their association, or will they be influenced in their roles as customers of the association? The Chair can manage overt instances of bias or self-interest through his or her oversight, but more subtle prejudices may be difficult to uncover.

The second caveat is workload. Assuming that most voluntary directors are not independently wealthy and also have full time jobs to sustain outside of their directorships, workload expectations need to be well managed. It takes time, effort and diligence to perform as a director. It is the Chair’s role to ensure directors are effectively trained for the responsibilities they have, and can manage the workload in addition to their other commitments.

Voluntary directors, like their paid counterparts, need to make a purposeful contribution to justify their continued tenure. It is the Chair’s role to ensure that they do, or to get them to move on in order to keep the board striving toward further progress.

Board Tenure

There is no single rule that states how long directors should sit on a board. The guiding principles of board tenure are framed around value delivery and perceptions, rather than a specific length of time.

Firstly, it is a director’s role to add value. So long as he or she is delivering value by making a worthwhile contribution, the actual length of tenure is less relevant. However, this raises another question of how long can a director reasonably give their best? How likely is it that he or she has already done this in (say) their first 10 years?

Secondly, when directors sit too long, it can look bad. Having one long-standing director of (say) 15 years tenure may not be cause for concern, but if the entire board is ageing, it creates problems with succession planning and their ability to engage younger prospects. Too many long-timers restrict the board’s ability to open up to diversity and can make it appear unattractive to fresh, young contemporary thinkers.

Boards can become stagnant and complacent. They need regular turnover to inject new thinking and ideas and to avoid groupthink, where a desire for harmony or conformity can result in irrational decision making.

Ageing boards increase the dangers of a dominant Chair overriding the checks and balances and transforming an association into a personal fiefdom. Directors need to be able to act against the Chair in these instances, and this becomes less likely where there are long established relationships.

Concurrently, ageing boards tend to accumulate the burden of a large bureaucracy that can increasingly weigh down an association. Groupthink and out-dated bureaucratic processes are anathema to millennials, and make not only boards but associations themselves unattractive to modern thinkers and members. Associations with excessively long-tenure boards risk missing out on attracting the talent they need for the future.

One option can be to move veterans into new roles such as patrons or advisors, or into committees and working groups to harness their long-standing experience – enabling boards to create an effective balance between experience and fresh thinking.

Risk & Strategy

How can striving boards move from governance as compliance, to fully embrace the performance benefits of good governance?

One lever is effective risk management, which is a link between compliance and performance. Risk is inherent in every activity. Zero risk equals zero progress. If there is no risk tolerance, an association is paralysed and cannot progress.

Risk taking is becoming more important for boards in order to tackle the disruption of markets, to counter new competitors threatening traditional membership offerings and to deliver on heightened member expectations. These threats are in addition to the everyday vulnerability of associations to adverse impacts.

Boards need to learn how to assess risk and determine their risk tolerance. The risk spectrum covers options from risk averse, to minimalist, cautious, open or aggressive. Boards can determine how to manage risk through a strategic risk management framework that identifies and sets the risk appetite, even when risk combinations of adverse events occur concurrently. For example, a perfect storm of a membership decline at the same time as a cut in government funding and the arrival of a new competitor in the market. In today’s dynamically changing market, the reality of this actually happening is more than hypothetical, and boards need to be prepared. At times like this, a high risk strategy may be unavoidable, but it needs to be managed all the same.

Associations can end up simply spinning their wheels in uncertainty if boards have not identified how much risk they are prepared to take.

The Right CEO

Governance is more than the board.

It needs the right CEO, and recruiting one requires the very tenets of good governance itself – a diligent process, strategic thinking and effective risk management. Ultimately, the performance of the association is at stake so the board’s choice of CEO is one of its most important decisions.

Nikki Beaumont, CEO at Beaumont Consulting offers some advice for boards.

  • Plan Ahead – Accrue a budget for recruitment costs ahead of time, and link this to the notice period of the existing CEO. That way, cost pressures are alleviated and funds are available as soon as you need them. Ideally, plan for a handover period.
  • Know What You Want – Be honest and upfront on what the challenges and expectations are. Be clear if you want the same skillsets as the previous CEO, or need something different. Evaluate this objectively against specific criteria.
  • Take Your Time – Don’t rush, even if you feel pressure from staff or members. The cost of making a wrong appointment is high. Fast turnovers of CEOs can ignite negative member perceptions. If you’re hesitant, don’t make the appointment.
  • Comprehensive Process – Reach beyond the membership by advertising in multiple channels such as AuSAE or CEO forums in addition to SEEK. Go out to existing networks and use referrals to establish an effective base of interested candidates.
  • Search Expertise – Boards are often not trained to hire a CEO for an association. The need happens infrequently so the Chair or board selection committee may not have prior experience or best practice recruitment skillsets. Fill the gaps with search expertise.
  • Commercial Skillsets – The nonprofit status does not mean an association shouldn’t make a surplus, and a CEO with commercial skillsets can relieve financial pressure. Value appropriate commercial expertise.
  • Governance Training – Look for candidates who have completed the governance course at the Australian Institute of Company Directors or the Governance Institute.

Mark also outlines some of the most common errors boards can make.

  • Sector Expertise – Boards that assume candidates must come from their sector limit the talent choice unnecessarily. For most associations and peak bodies, this is not essential. It is better to have a CEO who knows how to run an organisation, but it certainly helps if he or she has an interest in the sector.
  • Cost Savings – The recruitment process may be cheaper to do internally, but the cost of getting it wrong is high. Business critical damage to member relationships, staff and the brand can be inflicted quickly.
  • Skillsets First – Boards that assess the budget to see who they can find for the price may miss out on the critical skillsets they need. It is better to identify the required skills to lead the association and pay a bit more for an ideal candidate. If there are cost pressures, put in Key Performance Indicators or look for a commercially savvy CEO who can pay for himself or herself through revenue growth.
  • Empower the CEO – Once appointed, manager expectations on both sides by setting clear roles and objectives and give the CEO authority to do the job. Let go of operational items, don’t micro-manage and keep the board focus on good governance.

‘Sometimes it helps to use third parties to recruit an engaged CEO,’ says Nikki. Agencies can also assist boards write effective ads and clear job descriptions, as well as advising on what’s worked before to avoid the common pitfalls.

Board Perspectives

The Associations Research Survey revealed both similarities and differences of perspective between CEOs and boards. The data below compares the responses received from CEOs and boards to the same questions.

Biggest ChallengesCEOBoard
Insufficient Resources79%23%
Member Expectations45%12%
Board Capability39%9%
Conflicting Priorities39%4%
Traditional Mindsets36%12%
Resistance to Change36%6%
Governance Structure23%6%
Staff Capability21%8%
Commercial Difficulties16%5%
Unclear Objectives13%5%

Boards identify far fewer challenges in running associations than CEOs. Less than a third of boards are in agreement with the top seven challenges highlighted by CEOs, a list headed by Insufficient Resources and Member Expectations. Only between one in four or five boards agree that Board Capability, Conflicting Priorities and Resistance to Change are challenges that need to be addressed.

CEOs responsible for association management may be better placed to understand the day-to-day challenges, but the data shows a clear need for this to be communicated more articulately to boards. Left unaddressed, divergent perspectives can lead to frustration or resentment on both sides.

The way forward is through open, robust and healthy discussion. The most constructive way to debate both perspectives is through the gathering of objective evidence and its potential impact on mission and vision delivery. The first aim is mutual understanding; the second is alignment on key issues. It could well be the CEO changing perspective and tackling the challenges with more confidence, or the board becoming more supportive.

Both are win-win solutions for the association.

Biggest ThreatsCEOBoard
Government Funding/Policy57%55%
Changing Member Needs48%60%
Increasing Competition30%30%
Systemic Change25%5%
Digital Disruption20%10%
Market Consolidation18%20%
Sector Specialisation13%25%

Conversely, boards identify greater future threats than their CEOs, in particular on Changing Member Needs, Sector Specialisation and Market Consolidation, although they disagree that change is systemic by a factor of five to one.

Boards may be better placed to understand future threats, especially if they are members themselves, or operating companies within the membership market. Similarly, the data shows that their perspectives could be better communicated to CEOs. The same robust, open discussions can have a similar effect. Cumulatively, with both sides sharing their standpoints and experiences with each other can create a powerful working relationship. When boards and CEOs feel supported by one another, they can challenge and inspire themselves to improvement – the ultimate success of the board will be in its leadership and chemistry with the CEO.

Extent of DisruptionCEOBoard

Both boards and CEOs agree on disruption, although CEOs perceive it as more extreme.

Good/Excellent PerformanceCEOBoard
Mission & Vision58%62%
Future Focus58%43%
Market/Sector Needs51%43%
Member Needs49%57%
Managing Change42%38%
Commercial Growth19%19%

Boards rate current performance against Member Needs higher than their CEOs, but are less confident in their association’s Future Focus or delivering Market/Sector Needs.

Key Performance TargetsCEOBoard
Strategic Goals30%24%
Mission & Vision18%29%
Annual Operating Plan35%19%
Your Performance33%5%
Staff Performance28%14%
Board Performance7%10%

Boards and CEOs report varied perceptions on whether detailed key performance indicators have been applied, but agree that most boards seem to be exempt.

Both sides may benefit from a best practice definition of what constitutes an effective key performance indicator, and from open discussions that align their agreement of how this is being applied throughout the association.

Excellent Employee CapabilityCEOBoard

Boards and CEOs are in agreement that Passion is the greatest capability of association employees, and that the poorest capabilities are Innovation, Adaptability, Accountability and Engagement. The way forward is a robust debate on internal capacity building – and what the association needs to do to nurture these critical skillsets for the future.

Excellent Board CapabilityCEOBoard
Vice President9%25%
Other Board Members5%10%
Nonprofit Governance18%10%
Risk Management9%15%
Strategic Management5%15%

Unsurprisingly, boards generally self-rate their own performance higher than CEOs. However, the capability scores from both sides on the three most critical board functions were similarly low, with 55% of boards rated as poor/mediocre on Governance, 67% poor/mediocre on Risk Management and 66% poor/mediocre on Strategy. Both point to opportunities for improvement. Evaluating the board’s performance is as important as evaluating the CEO’s and both need to be conducted with diligence and transparency. When the board and CEO discuss how they can both improve in tandem, the association wins.

Board Volunteer IntentionCEOBoard
Personal Gain43%15%

Most agree individuals join volunteer boards for the right reasons – to make a Contribution. But where board directors see themselves as more Altruistic, around half the CEOs perceive them as motivated by Personal Gain or Prestige/Status. Association board directorships provide an opportunity for individuals to have a real impact on the sectors they care about, and it necessarily hurts an association when people take on a board seat for personal motives or don’t take their responsibilities seriously. Boards concede that they are more driven by Power than CEOs estimate – reinforcing the importance of clarity around the separation of powers between the roles.

High/Total Future Confidence CEOBoard
Outperforming Competitors58%24%
Maintaining Relevance37%43%
Achieving Mission & Vision46%34%
Overcoming Threats34%19%
Handling Disruption32%29%
Financial Sustainability27%24%
Commercial Growth19%19%

While the majority of CEOs are confident of Outperforming Competitors, less than a quarter of boards agree. There is a need for analytical, objective data like market share analysis to settle this point – and inform the strategy. Measuring performance against competitive benchmarks will also serve to bring board and CEO perspectives in line with both one another, and the reality of the market. CEOs are more confident of Overcoming Threats than boards, although this reflects the fact that they also identify fewer threats.

Risky Board Business

Differences in perspectives between boards and CEOs can undermine the quality of their relationships. Unaddressed, opposing viewpoints can escalate quickly. The title of another Tom Cruise mega-movie sums this up perfectly – Risky Business.

The trust between a Chair and his or her CEO is paramount. If trust breaks down, it can divide a board or separate management from the board and in that instance, someone has to go. It might well be the CEO if he or she is not performing, but the Chair also needs to look inward sometimes. If the CEO is performing well and has the support of the board and the leadership team, the Chair needs to make a difficult decision and step down.

So what are the biggest strains on the Chair-CEO relationship, and how can they be managed so that it doesn’t come to this? How can these potentials for negativity be transformed into positive change that unites them towards a successful future?

The complaints CEOs make about Chairs or boards are often expressed around the water cooler at association industry conferences, when they get a chance to compare experiences with their peers. It’s not a topic covered in keynote presentations but confined to informal off-the-radar gatherings where CEOs can find their experiences of inappropriate board behaviour may be widespread across diverse sectors. The purpose of bringing these conversations out into the open is to enable this behaviour to be mitigated – from either side. Both CEOs and Chairs share a responsibility to move towards solutions, although it is the Chair’s role to bring the board into line.

So what are the top water cooler grievances CEOs have about risky board behaviour?

  1. Strategy – Not Operations

Untrained, some board directors may not know the difference between strategy and operations, especially if they have not worked in large strategic organisations. Small business operators may switch between strategy and operations at will, but board directors have a responsibility not to. The board’s role is clear, and it does not extend to operations.

Strategy is setting the direction of the association, devising objectives and identifying a range of strategies to pursue – and then monitoring progress towards them. Operations refer to the management and administration of business practices within the association, and are beyond the board’s remit. The lines are clear, and need to be respected.

While it may be natural to stray into operational matters, it is the Chair’s role to ensure this does not happen, or to put into place a separate process outside of board meetings for any operational suggestions to be put forward. The CEO can then view these as suggestions only, not as dictates.

Directors wasting precious board meeting time on operational matters ranks top of the list for many CEOs as a major cause of frustration. It is an unhelpful distraction from the important discussions the board needs to have and a counter-productive intrusion into the CEO’s role. It breaks down trust, clarity and professionalism. Directors wanting to help can cause more problems if their input is not channelled through the right processes and in appropriately designated areas.

When the entire board focuses on strategy instead of operations, everyone wins.

  1. Monitor – Not Meddle

Passionate boards can think their roles are to help staff, lend their expertise, or get involved in management. Nothing could be further than the truth. The board is there to lead, but not manage the association. Its remit is to monitor the CEO and the association’s progress, but not to meddle in its management. CEOs are justified in this water cooler complaint, which they see as the board’s encroachment on their management responsibilities. Good governance makes the separation of powers clear. Everyone has a job to do, and must be empowered to do it – if it is to be done well.

So what constitutes meddling? Water cooler CEOs say that it is primarily the board’s access to influence or direct staff, or interfere with the actual process of management. Meddling is when directors make operational suggestions and then act on them.

Association employees have easier access to their board directors than their commercial counterparts. The upside to this is that boards can gain more visibility to the culture of the association. The downside is that this exposure can lead to board directors exerting undue influence or pressure on employees, who may not have the training or skills to resist. This makes it difficult for employees to prioritise, which is why the filter of the CEO is critical. In meddling with staff, board directors undermine the authority of the CEO and the leadership team, and create an unstable environment. With lines of reporting breached, staff can find themselves without direction and confused about where to turn for leadership and guidance.

Professionally competent CEOs may find it difficult to tolerate boards meddling in operational management issues, because it restricts them from being able to perform their own roles diligently and effectively. The CEO necessarily looks to the board for support and guidance on strategy, governance and risk management. Without it, he or she is already hampered. Boards meddling in operational matters only make things worse for everyone. This includes the CEO, the employees and ultimately the association and its members as well. Similarly, CEOs who passively condone meddling boards accelerate the damage to all stakeholders.

  1. Professional – Not Social Focus

The board is there to do an important job, and requires a consistently professional focus. It is not a social club or a fellowship of mates. Camaraderie is essential, but it is not the objective – it is a pleasurable means to an end.

What are the gripes of CEOs in this respect? One of the most common is directors who don’t read their board papers, come unprepared for meetings or fiddle with their phones during board discussions. If they were in kindergarten, the teacher would put them in the naughty corner for sure! Anything less than professional courtesy is dismissive of the power directors hold over the association, and disrespectful to any employees attending the meeting. Directors need to come prepared, be attentive, make a direct contribution and ask insightful and challenging questions to raise effective discourse.

Board directors who do not say a word during board meetings or contribute in other ways throughout the year except to vote on resolutions should come under scrutiny. Some are happy to be flown in and accommodated at hotels to enjoy the fun of board dinners, the company of their peers and the kudos of their directorships. But what value do these individuals bring? Proper evaluation of all board directors is required so that their contribution is clear, otherwise these ‘sitting members’ need to move on.

Some CEOs have admitted to retaliating with long, tedious board papers. This is not the solution. CEOs have a duty to ensure that board papers are clear and succinct, are not designed to keep the board in the dark, and do not take a combative stance. In return, boards should not take a dictatorial position which is equally unconstructive.

  1. Difficult Decisions – Not Easy Avoidance

Water cooler CEOs bemoan boards uneasy about confronting problems in the hope they will go away, and reluctant to make difficult decisions. Their thinking is validated by some management consultants who suggest that volunteer boards generally prefer an easy life, and want to see things ticking over nicely on the surface rather than tackling the underlying problems. If this is true, consultants need to earn their keep and advise boards very differently.

Governing is hard and includes difficult choices on difficult issues. If an association is to move forward, it cannot avoid confronting tough or unpopular decisions. Doing so undermines progress. There will always be resistance to change. Boards that try and avoid issues of conflict in an attempt to please everyone will inevitably fail. Doing what’s right is never easy, and boards must hold their nerve. They need to steer their associations assertively towards mission, vision and objectives – and empower CEOs to overcome the hurdles and challenges in the way.

  1. Open Debate – Not Hidden Agendas

CEOs reporting to boards that do not encourage open, robust debate can find themselves frustrated.

Open debate is how organisations think. It is as true for associations as it is for corporates or government in enabling better decision making. Discussing options proactively from different or conflicting viewpoints helps identify and weed out potential weaknesses. Logical, passionate arguments help determine the best outcomes for the greater good.

The opposite of active debate is passive silence. It increases the risk of personal preferences creeping in to board discussions from dominant personalities. Unchallenged by a robust board process for debate, it becomes easier for bias and hidden agendas to take hold. In these instances, professional CEOs look to their Chairs to uphold good governance.

Encouraging healthy, respectful debate is an effective method for ideas to be shared, communicated and negotiated within a group dynamic. It allows contrary thoughts to be considered in order to develop the optimum strategy with which to move forward. Diversity of thinking is the basis of continuous improvement and innovation. Boards must create an environment where directors and CEOs can speak up freely within an environment of respect, fairness, objectivity, truth and transparency.

  1. Other Indiscretions?

By the time conferencing CEOs get to this point, the conversation has probably moved from the water cooler to the bar, and needs to end.

My greatest wish is for this book to bring boards, CEOs and employees together – to work collaboratively in the best interests of their associations. This may take some reflection, so here are eight priorities that apply equally to CEOs and employees as they do to boards.

  • Serve the members not individual preferences.
  • Be accountable and take personal responsibility.
  • Look for alignment, not silos.
  • Stick to the strategy, don’t flip flop between whims.
  • Do the core well and the basics brilliantly.
  • Don’t expect privileges or preferential treatment.
  • Don’t settle for the status quo, but ignite progress.
  • Never stop learning and keep contributing to good governance.

Case Study: Engineers Australia

Association: The Institution of Engineers Australia (Engineers Australia)

Size: 105,000 Members, Over 300 Staff & $56 Million Annual Revenue

The Institution of Engineers Australia is a text book example of how contemporary governance reform underpins the strategic modernisation of an association into the future.

Responding to what had been the toughest engineering employment market in the past 25 years Engineers Australia embarked on a major cultural reform program, to transform the association into a modern and efficient organisation with contemporary business practices.

‘A complete overhaul of the governance model became the foundation for a truly strategic realignment of what the association needed to look like in order to be perceived and heard in the community,’ says Brent Jackson, Executive General Manager of Communications and Member Service.

As an organisation constituted by Royal Charter with 105,000 members, governance reform was no simple task. Three years of active per-to-peer engagement and two member ballots were required to first, update the membership categories to reflect contemporary changes within the engineering profession and second, to enact key resolutions to modernise the board and the governance structure.

After 98 years, Engineers Australia moved from a volunteer Council working in tandem with the National Congress to a remunerated governing Board. This enabled Engineers Australia to co-opt directors onto the board who were not necessarily members, and attract the best available talent from a wider pool of potential directors to fill the critical skillsets they required to drive the modernisation. Previously, the choice of CEO had been limited only to Fellow Members. The governance reform lifted this requirement and enabled the appointment of a new CEO with the commercial skillsets to realign how the business needed to be organised. In line with best practice requirements for a nimble, efficient and relevant organisation, the governing Board has just nine directors. In another move towards efficiency, the size of the National Congress, which elects and monitors the Boards, has been reduced from 50 members to 32. The change from a traditional member committee to a contemporary board brought with it not just an optimum structure, but the deeper business-thinking required to realign the association.

The governance structure also allows for deeper representation, with specific roles for division committees, college boards and various other committees. Nine geographic division committees set their division strategies within the overall strategic plan. Nine sector-specific college boards broadly cover all areas of engineering. Other committees include special interest groups such as Young Engineers and Women in Engineering.

Some of the challenges included the traditional and conservative nature of the association, but Engineers Australia was committed to ensuring members knew that the changes meant safe passage for the future. Royal assent for the changes to the Royal Charter were confirmed when the Governor General of Australia declared the ballots successful in April 2015. The 80% approval from 65,000 eligible voting members reflected that members were open to progressive change.

Two key engagement strategies underpinned Engineers Australia’s thorough consultation by mobilising hundreds of volunteer committees to reach out to as many of their 105,000 members as possible:

  • Peer-to-Peer Engagement – Engineers Australia relied on members to engage members. This peer engagement initiative created trust and relevance. Members commented that it felt like they were creating the future themselves. This allowed them to commit more readily to the vision and made the change feel safe.
  • Interactive Forums – Members were invited to express their opinions unchecked, and it was this openness that Engineers Australia fostered that generated trust and respect. It also provided effective feedback on the most critical member needs.

This extensive and ambitious governance reform became the foundation for the strategic realignment of the association, and was informed by the most expansive body of research ever carried out. The external consultation process ensured that the strategic vision was seamlessly aligned to the collective needs of members. The internal operational structure was then aligned directly to support the strategic vision.

The modernisation has already enabled Engineers Australia to build on its strategic growth agenda – in building a stronger external orientation, implementing technology to deliver member value and other initiatives to best represent the profession.

Engineers Australia has maintained its relevance as an association in both the public eye and all areas of the engineering profession. It has not rested on the laurels of a 98 year history, but modernised along with the profession itself and the needs of its large member base. It has generated the fiscal stability and commercial growth to be able to invest back into providing better products and services, creating a virtuous cycle of revenue growth in line with mission and vision. The association now has over 300 staff with the specialist expertise as a successful business in its own right.

And yet there is still more to do adds Brent – the modernisation is still in its early stages, but the membership has a strong appetite for change. The successes have given them the confidence to continue reshaping the association’s future focus.

Case Study: AHRI

Association: Australian Human Resources Institute (AHRI)

Size: 20,000 Members & 50 Staff

While its origins are traceable back to 1943, the modern history of Australia’s truly national HR association began in 1992 when the various state branches of the then Institute of Personnel Management of Australia (IPMA) resolved to come together under a new federal constitution written in plain English. The new body was called the Australian Human Resources Institute (AHRI).

The inaugural AHRI president, Jim Bailey, put on record in HRMonthly that the new institute was launched on 1 May 1992, a day on which almost a thousand members attended celebratory lunches around the nation. The president also announced the unveiling of an AHRI logo, one that has largely remained unchanged to the present day.

At that time, 10 standing committees operated in International Relations, Constitution, Finance, Government Relations, Asia Pacific Journal of Human Resources, HRMonthly, Education, Professional Development, Membership Grading, and Public Affairs. Eight of those committees were chaired by men as might be expected of a profession which at the time was still largely male-dominated.

A six-member board presided over the new institute under Jim Bailey, which consisted of five male directors and one female director.

In late 1992 John Lee was appointed CEO, and was based at a new national office in Neutral Bay. In July 1993 Graeme Andrewartha was elected president, a role he held until 1996. By December 1993 John Lee had resigned as CEO and an executive director, Pamela Pearce, was appointed in September 1994.

While things went well with the new national association until 1997, there was evidence during the Andrewartha period that members needed to be reminded to get their hearts and minds ‘into a sense of one company, one institute, which is there for all of us,’ as he put it in his HRMonthly column in December 1993.

In a foreshadowing of the present day, Andrewartha called on members to recognise the ‘larger responsibility in the next 10 years, not just to our members but to the employers in our members’ firms and the wider community’.


Pamela Pearce’s period as executive director ended in September 1996 and in the two years that followed the institute lost its way. Pearce was replaced by Viv Read in an acting role until the appointment of Robyn Morisset in October 1997. This became a period of high turnover, financial mismanagement and significant disquiet at the Institute, until Morisset’s resignation was sought and the board called in an administrator in 1999.


Deakin University’s commercial arm, DeakinPrime, purchased AHRI in late 1999 and operated the institute as a division of the University with a national office based in Melbourne. Jo Mithen was CEO for virtually the entire Deakin period, reporting to a board made up of university appointees. Under the board chairmanship of the vice-chancellor, Professor Sally Walker, AHRI was tendered for sale in 2006 and a consortium of members led by Peter Wilson and John Wilson purchased it that year, and then re-mutualised it back to members.

2006 to the Present

During the 10 years from 2006 to the present day, AHRI has experienced a period of stability and growth under a board chaired by the present national president, Peter Wilson, who also acted as the first chief executive for the last half of 2006.  The first full time chief executive appointment thereafter was Serge Sardo in 2007, whose tenure saw the institute pay back its purchase price and move to a secure financial footing. When Sardo resigned in 2012 to take up a government appointment, the deputy CEO and manager of profession development, Lyn Goodear, took over as CEO in a harmonious and orderly transition.

As was the case with Sardo, Goodear reports as a CEO and a managing director to the board, and by so doing takes on a stronger fiduciary duty than reporting as a CEO alone. The present board is made up of two directors who are drawn from the elected council of state presidents, five independent directors including the chairman, an alternate director from the public sector and a managing director. The nine-person board consists of five male and four female directors, and brings a judicious mix of HR know-how and prudent business acumen to the oversight of the institute.

At time of writing AHRI is focused on building on the existing cachet of its flagship national convention, in addition to improving member customer service, and member retention and growth.

AHRI is also embarking, in alignment with its international counterparts, on a bold HR certification initiative that comes into full operation during 2017. HR certification marks a defining moment for the institute. The initiative was the outcome of a joint meeting in December 2014 of the Council of State Presidents, the Management Group, and the AHRI Board.

The resolution passed at the joint meeting acknowledged the increasing professional expertise being demanded of HR practitioners in a globally competitive business environment. In addition, it recognised that the standard being set needed to be sufficiently exacting to send a signal to employers and HR practitioners that AHRI certified practitioners will have the expertise required to practise good HR as true partners to the business, and will also have demonstrated to AHRI’s satisfaction that they can do in practice what they say they can do.